This fairy tale was re-told most recently by Republican National Chairman Ed Gillespie when he said in a Dec. 3 speech: “80% of the tax relief for upper income filers goes to small businesses.” It’s untrue – and a classic example of a statistical distortion gone amok.

It may be true that 79% of upper-income taxpayers have some income from business, but Gillespie’s definition of “small” business actually includes big accounting firms, law firms and real-estate partnerships, and “businesses” that are really only sidelines – such as occasional rental income from a corporate chief’s ski condo. In fact, tax statistics show that upper-income taxpayers get far more of their income from salaries, capital gains, stock dividends and interest than they do from small business.

Analysis
By twisting statistics and over-hyping, Republicans are spoiling for themselves what would otherwise be a perfectly serviceable argument: lowering taxes on the most affluent Americans does indeed lower taxes on many small businesses, and thus creates more jobs. But not nearly as many as Gillespie and some other Republicans are claiming.
It is undisputed that that many small-business owners report profits from their companies on their personal income-tax returns and not on corporate returns. It’s also true that small business is a major source of new jobs, and economists generally agree that lower business taxes eventually tend to produce more hiring. So cutting the top tax rate probably does stimulate some small-business hiring. But how much? Nothing close to 80%, it turns out.

Where Top Taxpayers Get Their Income

(Average share of income from different sources to those paying the highest tax rate of 35% in 2003)

The 80% claim originated last May with a report by the Republican staff of the Joint Economic Committee of Congress, where it was prepared as ammunition for the debate over the second Bush tax-cut bill which eventually became law later in 2003.

That report concluded that 79% of the highest-income Americans have some business income. Then the report made a huge leap, claiming “These small business owners would receive 79 percent of the … tax savings” from cutting the top tax rate. But wait a second – very few of those “small business owners” are really running dry-cleaning stores. A Republican committee staff member confirmed to FactCheck.org that their report is counting anybody who made even one dollar of profit from a hobby business as a “small business owner” if they reported that income on Schedule C of their federal income-tax returns.

Their method also counts as a "small business owner" any member of an investment club -- someone who put $50 a month into a pool to buy stocks with friends and then reported a few dollars of dividends and capital gains on a K-1 form from the partnership at the end of the year.

And that’s not all. Also counted as “small business owners” would be:

--A corporate executive who made $500,000 in salary and bonuses, and who also had $3,000 in income from renting out his yacht.

--A TV anchorwoman making $1 million in salary and reporting $25,000 in speaking fees as Schedule C income.

--A partner in a national accounting firm who has no side business at all, but who gets a big chunk of his income as a share of the giant partnership’s profits.

It’s silly to call any of these “small business owners,” but Gillespie went even beyond what the report said. He said 80% of the tax relief went to “small businesses,” (as opposed to “owners”). Not even the Republican staff report can back that statement.

So how much of the benefit really goes to small business? According to an analysis by the nonpartisan Tax Policy Center, done at the request of FactCheck.org, business income accounts for just over 22% of the income that will be reported this year by the most affluent American households. Those upper-income taxpayers actually get more from interest, dividends and capital gains than they get from business income, but Gillespie said nothing of the tax benefits on that score.

Both the Republican study and the Tax Policy Center focused on the same group of elite taxpayers -- those paying the top income-tax rate. (That's the rate which dropped to 35% this year from the previous level of 38.6% under the most recent tax cut.) In an earlier look at the same group, the Tax Policy Center found that roughly three out of four taxpayers paying the top rate got less than half their income from business. That’s a fact that some Republicans continue to ignore as they spin their small-business fable.

A group of high school students attending a conservative leadership conference in Washington, D.C. said they were ordered by a security guard to stop singing the national anthem during a June 25 visit to the Lincoln Memorial.

The tax cuts that are to expire in Jan. 2011 are for families making more than $250,000 a year. This will have minimal effect on small business where as the GOP is claiming it will shut down small business if the cuts are not continued.

I hate to say it but YOU are a shining example of people that don't know s--t. You don't have any idea about what's going on and you sit back with the rest of the clueless crew and point fingers.

Education time: If the tax cuts are not extended - and if nothing is done to extend cuts for that group earning less than 200K: (THAT MEANS DUMMY THAT THE TAX CUTS JUST RUN OUT) then everyone (INCLUDING YOU IF YOU WORK) will have a tax increase. THOSE TAX CUTS ARE NOT AUTOMATIC FOR PEOPLE EARNING LESS - CONGRESS MUST ACTUALLY DO SOMETHING OTHER THAN LET THE CUTS RUN OUT! You dumacrats sit around thinking the wealthy owes you a living and you are too stupid to educate yourself about things. You think it all nice and cozy in dumbo land and you are too stupid to listen to what conservatives are saying.

All those little freebies like getting more than you pay in will be affected. I can't think of a better way to teach you bunch of dumbocrats a better lesson than to strip those handouts from you.

A Republican plan to extend tax cuts for the rich would add more than $36 billion to the federal deficit next year -- and transfer the bulk of that cash into the pockets of the nation's millionaires, according to a congressional analysis released Wednesday. New data from the nonpartisan Joint Committee on Taxation show that households earning more than $1 million a year would reap nearly $31 billion in tax breaks under the GOP plan in 2011, for an average tax cut per household of about $100,000. The analysis, requested by Democrats on the tax-writing House Ways and Means Committee, comes as debate heats up over tax cuts enacted during the Bush administration, most of which are scheduled to expire at the end of this year. Republicans want to extend all the cuts, which would cost the Treasury Department $238 billion in 2011, according to the taxation committee. President Obama and congressional Democrats have vowed to extend the cuts only for families making less than $250,000 a year and individuals making less than $200,000 -- 98 percent of American taxpayers -- in a plan that would add about $202 billion to next year's deficit.
It’s always those who engage in name calling who fear what they don’t know and then project that frustration on to others

I find it interesting that you think taxing the rich is taking what doesn’t belong to you. When it comes to the middle class and their labor, it has been for some time now, not what their labor is worth but what senior management can get away with, not having to compensate for. The CPI has continued to rise on the average of 3% a year while middle class salaries and increases where lucky to increase 1%, if anything at all. Mean while, senior and corporate management pay, has over the last decade, doubled if not tripled. Even I know the difference between a mutual business arrangement and gross exploitation. In what corporations have failed to honestly pay for in what labor is worth government has had to go in and compensate the middle class. Government in many ways on the outside looks to continue to increasing handouts to lower and middle class but in reality has become just corporate welfare for what they deny what is due to those they employ. If you would take off you idealistic blinders you may get a healthy dose of reality or maybe even find you do have a heart.

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